Fulfilling Fiduciary Obligations Can Present Challenges for 401(k) Plan Sponsors

Concluding Observations As the retirement security of American workers increasingly depends on 401(k) plans, it is important that plan sponsors fulfill their fiduciary responsibilities in connection with such plans. Sponsors make decisions about the investment features of a 401(k) plan that carry significant fiduciary implications. Some, particularly those with small plans, may have limited time, specialization, knowledge, and ability to negotiate about service providers or investment funds. Absent a greater understanding of how sharing plan functions with their service providers or delegating functions to them may lead to confusion about fiduciary roles, some sponsors are likely to remain vulnerable to advisers or other providers whose compensation and affiliation may promote interests besides those of the plan, such as higher plan fees. Since our 2006 report, Labor has made progress on its disclosure initiatives but some important fiduciary issues have yet to be fully addressed. In our previous reports, we asked Congress to consider amending ERISA to (1) explicitly require 401(k) service providers to disclose to plan sponsors the compensation they receive from other service providers and (2) give Labor authority to recover plan losses against certain types of service providers, even if they are not currently considered fiduciaries to that plan under ERISA. While Labor has proposed a regulatory change that could eliminate some of the confusion surrounding certain fiduciary obligations, it is unclear how closely the final regulation will follow the proposed rule. We continue to believe that changes to ERISA would help Labor in its efforts to promote sponsors’ fiduciary oversight and be in the best interest of participants.